Persistent joblessness a big risk

Friday

Nov 2, 2012 at 6:00 AMNov 2, 2012 at 8:43 AM

By Annie Lowrey and Catherine Rampell THE NEW YORK TIMES

In the economy-focused presidential campaign, the two candidates and their teams have scarcely mentioned what economists describe as not just one of the labor market’s most pressing problems, but the entire country’s: long-term unemployment.

Nearly 5 million Americans out of work for more than six months are left to wonder what kind of help might be coming, as the Federal Reserve, the International Monetary Fund and a bipartisan swath of policy experts implore Washington to act — both to alleviate human misery and to ensure the strength of the economy.

The pain of the long-term unemployed has persisted even as the overall jobs picture has brightened a bit and the unemployment rate has fallen to 7.8 percent. The new government report for October was due to be released this morning.

“The problem is incredibly urgent,” said Kevin A. Hassett, director of economic policy studies at the American Enterprise Institute and an adviser to Mitt Romney’s campaign. “Spain had a financial crisis in the late 1970s and has never seen its unemployment rate drop back to where it was before that crisis. The unemployed become discouraged, and ultimately the employment-to-population ratio might take a permanent hit.”

On the agenda for the next Congress and the next president is ensuring that the long spells of unemployment now afflicting jobless workers remain a temporary setback of the recession.

Economists warned that long-term unemployment could be transformed in the next few years into structural unemployment, meaning that the problem is not just too few jobs and too many job seekers, but a large group of workers who no longer match employers’ needs or are no longer considered employable.

“Skills become obsolete, contacts atrophy, information atrophies, and they get stigmatized,” said Harry Holzer of Georgetown University.

That has been the experience of millions of workers such as Beatrice Hogg, 55, of Sacramento, Calif., a college-educated, white-collar worker who has slid from the middle class into poverty.

Her last job — doing administrative work and advising students at a community college — ended in June 2009. Her unemployment benefits ended more than a year ago. She was evicted from her apartment in December and has been staying at friends’ homes and occasionally at train stations. Despite her efforts, she has been turned down for job after job after job; she is surviving on food stamps.

“I don’t enjoy being out of work,” Hogg said in an interview. “I don’t enjoy having to ask friends to give me rides or get things for me. I want to take care of myself. I’ve been on my own since I was 18 years old. It’s hard for me. It’s demoralizing. It’s hard to ask people for things when you’ve been independent the rest of your life.”

Stronger economic growth may help to whittle the ranks of the long-term unemployed over time, experts said.

But many economists contend that policies to help the long-term unemployed are needed as well, to ensure that they have the skills necessary to compete for the jobs that the economy is adding — turning construction workers into oil-and-gas extractors and administrative assistants into home health care providers, for example.

In Washington, many politicians support measures for the long-term unemployed; few demand them. The White House put out a range of proposals to aid the long-term jobless as part of its stalled American Jobs Act legislation, a few of which made it into a bill extending a payroll tax cut this year. Romney has proposed, among other measures, creating “personal re-employment accounts” to give funds to unemployed workers for community college or vocational training.

The number of workers who reported actively seeking a job for more than six months fell to 4.8 million from 6.2 million in the past year, according to government data. The proportion of jobless workers who counted as long-term unemployed fell to 40 percent from its peak of 45.5 percent in March 2011.

But it remains a bleak situation. About 800,000 workers want a job, but have simply given up looking and so are no longer even counted as unemployed. About 1.7 million people have joined the disability rolls since the recession began at the end of 2007, an increase of 24 percent, as workers use the disability program as a backdoor safety net when their unemployment insurance runs out. After searching for a new position for a year, a worker finds that his chance of regaining employment in the coming month falls below 10 percent.